CMA CGM S.A. v Classica Shipping Co Ltd.

Under the Convention on Limitation of Liability for Maritime Claims of 1976, a charterer is entitled to limit liability in its capacity as charterer. Article 1(2) does not impose a further requirement that the charterer act qua shipowner.

Entitlement nevertheless depends on the type of claim within Article 2. A claim for loss of or damage to the ship by whose tonnage the limit is calculated is outside Article 2.1(a), as are consequential salvage and general-average liabilities arising from that damage. A charterer may, however, limit liability for cargo damage, including an indemnity claim passed through the shipowner.

A container ship was damaged by an explosion caused by containers of bleaching powder. Arbitrators held that the time charterers had breached the charterparty prohibition on dangerous cargo and awarded the owners damages exceeding US$26 million, with consequential declarations.

On an appeal from the award, David Steel J held that a charterer could limit liability under the 1976 Convention only when acting qua shipowner, namely by operating or managing the vessel: [2003] 2 Lloyds Rep. 50. The charterers appealed.

The central issues were whether Article 1(2) restricted a time charterer’s right to limit by reference to its capacity, and whether the owners’ claims for ship damage, salvage, general average and cargo liabilities fell within Article 2.

1. Appeal dismissed, subject to a limited declaration. The charterers could limit only their liability to indemnify the owners for cargo claims. They could not limit the principal claims arising from damage to the vessel.

2. International conventions incorporated into domestic law must be construed without English-law preconceptions. Their ordinary meaning is ascertained in context and in the light of their object and purpose. Preparatory material and earlier conventions may then be used in the limited circumstances identified by Articles 31 and 32 of the Vienna Convention on the Law of Treaties.

3. Article 1(2) of the 1976 Convention defines a shipowner to include an owner, charterer, manager or operator. The ordinary meaning of charterer is a charterer acting as such. It does not carry a gloss requiring the charterer to be operating or managing the vessel, or otherwise acting qua owner. The contrary approach adopted in The Aegean Sea [1998] 2 Lloyds Rep. 39 was therefore rejected.

4. Article 2.1(a) does not cover a claim for damage to the very vessel whose tonnage provides the basis of the limitation calculation. The damaged property must be property on board or property other than that vessel damaged in direct connection with its operation. The Court accordingly agreed with the conclusion in The Aegean Sea on this point.

5. The owners’ repair claim, the liability for salvage services rendered to the vessel, and liability to contribute in general average all resulted from damage to that vessel. They were therefore outside Article 2.1(a), and no limitation was available for them.

6. By contrast, cargo claims concerned loss of or damage to property on board and fell within Article 2.1(a). Since Article 2.2 contemplates recourse and indemnity claims, the charterers could limit their liability where the owners discharged cargo liabilities and sought an indemnity.

• Court of Appeal (Civil Division) — dismissed the charterers’ appeal, while declaring that limitation was available in respect of the owners’ indemnity liability for cargo claims: [2004] EWCA Civ 114.

• Commercial Court — David Steel J dismissed the appeal from the arbitral award and held that a charterer could limit only when acting qua shipowner: [2003] 2 Lloyds Rep. 50.

• Arbitration — the arbitrators held that shipment of the bleaching powder breached the time charterparty and awarded the owners damages and consequential declaratory relief.